Boeing Makes First Move To Slash Widebody Output

By early in the year it seemed obvious to all but the OEMs themselves that significant production rate cuts would have to happen, but it would take until this month before Boeing would reach the same conclusion, as the company announced that it would curb output of its 777 line by around 29 percent starting next June and hold production of the 767 and 747-8 at one per month. Boeing’s 777 rates will fall from seven to five per month, perhaps leading to still more layoffs in Everett, Wash. But while the announcement no doubt came as unwelcome news to labor, financial analysts applauded the move, if only half-heartedly.

In a research report issued April 13, UBS called for a further 30- to 40-percent cut in 737 production, something Boeing still appears far from willing to concede. In fact, Boeing Commercial Airplanes CEO Scott Carson has said last year’s decision not to raise 737 rates has already begun to yield its intended benefits as Boeing managed to deliver 121 airplanes in the first quarter even while absorbing order deferrals for 60. Although nearly one-third of the respondents to a UBS fleet survey indicated they would likely defer orders this year, a similar number said they would advance their delivery positions should earlier slots became available.

That bit of data would seem to support Boeing’s assertion that it won’t have to cut production this year. However, while Boeing claims that most of its customers due to take airplanes this year have secured financing, 60 percent of the survey’s respondents reported a lack of financing “at reasonable terms.” UBS also recorded a drop in interest in narrowbody types from 50 percent of its respondents in its last survey to 23 percent, raising questions about the long-term sustainability of 737 and Airbus A320 rates.